What might a post-Brexit UK look like for legal compliance professionals?

Ambiguity has been a prevailing theme in discussions about a vote to leave the EU since the onset of campaigning for the referendum. And there has been little, if any, indication of how the UK might bridge the significant gaps that a vote to abandon the bloc would leave in the UK’s financial services regulatory environment.

In my previous blog I highlighted that the primary concern for UK institutions is the possible loss of access to EU markets and spoke about potentially vital equivalence regimes. However given that it is uncertain, at best, whether such equivalence discussions will have been issued by the end of the UK’s two year notice period it is no surprise that many in the financial services arena remain concerned.

Many commentators have suggested that the UK could negotiate a deal that resembles the one established between the EU and Norway, however given the political shortcomings of European Economic Area (EEA) membership, it is somewhat unlikely that the UK would adopt such a model. As an EEA member state Norway retains its passporting rights under MiFID, providing its financial services institutions the crucial ability to conduct investment business in EU member states.

However Norway’s model has numerous political weaknesses. Under its EEA membership Norway is subject to the EU’s free movement laws and contributes to the bloc’s budget on a per capita basis, but has no formal representation within the EU. Norway can refuse to implement EU laws adopted by the EEA, but if it does the entire area of competence into which that legislation falls would cease to operate within the single market.

Others have put forward Switzerland, and it’s very healthy financial services sector, as a potential example of how the UK could continue its relationship with the EU. The nation’s bilateral treaties and European Free Trade Association (EFTA) membership allow for the free movement of a majority of goods and services but as a non-EEA member Switzerland doesn’t hold passporting rights and Swiss businesses are generally required to establish subsidiaries based in the EU to access the single market.

Under new revisions to MiFID (MiFID II), which member states must be fully compliant with by 2018, third party access to EU markets is regulated at EU level, rather than by individual member states. The new regulation means that Swiss investment firms could potentially be able to conduct business in member states without establishing a branch there, but until an equivalence decision is made this remains uncertain.

So while many are still unsure about which way the vote will swing, one thing is almost certain; navigating a post-Brexit regulatory environment would prove significantly more difficult than today. The shifts in the regulatory environment will undoubtedly cause demand for well versed compliance professionals. However, the possibility of losing access to the single market may cause UK headquartered institutions to consider the viability of their operations with as yet unforeseen circumstances for career opportunities and development within compliance jobs.